A new tax law has been sanctioned regarding the real estate sector in Pakistan – something that’s perhaps the best development of the talks held between the Finance Minister Ishaq Dar, real estate representatives, and Federal Board of Revenue’s senior officials – plots originally allotted to the families of martyred officers of armed forces will be exempted from Withholding and Capital Gain Tax (CGT) on first sale.
Furthermore, provincial and federal Civil Services officers, employees of the Police Department, original plot allottees from armed forces and overseas Pakistanis will only be required to pay half the usual CGT. Does this mean that these folks will pay CGT at 5% instead of 10% if they sell property in first year of its purchase, 3.75% if they sell it in the second year and 2.5% if they sell it in the third year? I hope that CGT slabs work in a similar manner for them, but of course, at a 50% lower rate. Nonetheless, further clarity is needed.
According to news reports published in national dailies today, President Mamnoon Hussain has approved the second amendment in the Income Tax Ordinance 2001, which is to be effective right away. Initially, this amendment stands functional for 4 months, during which the Finance Minister Ishaq Dar will present the Presidential Ordinance Bill in the Senate and National Assembly. Per the news reports, as this is essentially a money bill, Senate will send its recommendations to the National Assembly in 14 days. Bear in mind that the bill will be passed once the National Assembly formally approves it.
The report also reads that property valuation mechanism earlier proposed by FBR, which suggested to carry out real estate valuation through valuers appointed by State Bank of Pakistan, was turned down by the Government of Pakistan. Instead, FBR has been given the task of determining the new Deputy Commissioner (DC) rate. Moreover, to determine new DC rate, which will be in effect from August 1, 2016, FBR will work in cooperation with representatives from the real estate sector and Federation of Pakistan Chambers of Commerce and Industry.
In this regard, FBR will initially determine the new DC rate in Islamabad, Karachi, Lahore, Peshawar, Gwadar, Quetta, Rawalpindi, Multan, Faisalabad, Gujranwala, Bahawalpur, Hyderabad, Sakhar, Rahim Yar Khan, Gujrat, Sialkot, Jhelum, Sargodha, Jhang, Mardan and Abbotabad. For property valuation in other cities, FBR will continue with assessment as and when needed.
As far as the difference in the rate of Withholding Tax applicable on tax filers and non-filers is concerned, there hasn’t been any change from what was earlier announced in the Budget 2016-17. When selling property, the filer will pay Withholding Tax of 1% of the property value determined by the FBR while the percentage set for non-filer is 2%. In case of property purchase, the percentage of Withholding Tax is 2% and 4% respectively for the filers and non-filers.
It is important to mention here that, per the news details, the second amendment issued by the president in Income Tax Ordinance 2001 does not include any amnesty scheme. So now we know for sure that no amnesty has been announced for the real estate sector so far.
Read more about the new tax amendments.
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I am an Overseas Pakistani and I saved up money which i earned in salary to eventually able to buy a Flat last year in Karachi. However due to not able to sign the deal i prepare all the documentation in the name of my mother, is there an easy way that i can transfer the said property under My name before i plan to sell it in a year time period and claim this amendment benefit.
you keep remittance advice issued by the back by which you are sending money
There is no mention of Overseas pakistanis anywhere. Are we only supposed to send remittances.
@Alex – you’re also supposed to pay taxes if you get income from here.
dude, I’m an overseas Pakistani too but I feel sorry for your mentality. You are not doing anybody any favour by sending remittances except for yourself and your family. If you think you automatically become entitled to something just for sending money back to your family, then I am sorry but Pakistan has survived and will survive without you mate.
Can’t u understand basic things that government offer good deals to OSP so that 1. Government can get foreign reserves which help gap budget deficit etc. Etc.
2. So OSP can invest saved money in Pakistan and help economy….
It’s not always about sending money to families but certain other aspects as well. I hope either you understand this or ask some economist who can help you…..
yes he doing favor…Pakistan getting foreign exchange
Good article Samraa. But things are not clear untill today. I dont understand why fbr considers overseas Pakistani as a non filet even though wevare filung tax returns and paying taxes overseas as per the trestu signed between pakistan government and pther countries. I believe this is biggest negilegence of fbr of putting overseas into non filer catagory.
Lastly dont understand why purchaser pays the tax and paying with 4 percent? These taxation on one side if fights against black market then in otherside brings big slump in real estate and poor people will become reluctant in buying property so in end poor people still suffering .
Even if overseas Pakistani is exempted of income tax in Pakistan, he/she still needs to file tax returns. It doesn’t matter if income in Pakistan is declared as zero. This way an overseas Pakistani becomes a filer.
Dear nasir sahib please read income tax ordinance we already file in overseas and also not understand why fbr not making third catagory of overseas Pakistanis
How will FBR propose fair market rates in retrospect? The price of land is not the same in any locality for all years. For example if the sellers are to pay CGT for a plot bought two years ago and sold it before the completion of three years the actual price was much less than what it is today.
This will be an unfair system of tax collection unless FBR produces a list of enhanced DC rates for each year for all localities staring from 2012. Moreover, no where in the world are taxes collected for past years when the rules are changed in the present year.
Dear Ms Zulfiqar,
Your work is praise worthy but there is always room for improvement. Kindly keep the sentiments of the general public especially of the weakest in the society always before hand while putting something here in black & white .
Good news for overseas Pakistanis, armed forces officers, and families of martyrs!
The headline should not have had the term “good news”. To bring clarity, it should have been
One time discount OR Discount on first sale only OR any other suitable term.
Besides that, whoever believes that a Martyrs Family can afford a 4M or even 3M investment even 1 time (more than 1 time is out of question for the 99.9999% of Martyrs anyway) is simply not living on this Earth. Whereas the other mentioned local breeds scrupulously known to afford multiple transactions have also been accorded this 1 time discount. The Overseas Pakistanis have got nothing short of a lollipop.
Another article here a couple of days ago clearly says about an Amnesty deal struck between the negotiators. It can be said conclusively that it was not willful on your part as negotiations will yet continue and official terms and conditions are still in the making. Kindly publish only the approved Govt decisions and refrain from the speculative. Thank you.
Agree….with your Comment.
the author is making News out of Speculations.
as they say in URDU…..”Khawahishaat ko Khabar Bana deyna”
How will FBR propose fair market rates in retrospect? The price of land is not the same in any locality for all years. For example if the sellers are to pay CGT for a plot bought two years ago and sold it before the completion of three years the actual price was much less than what it is today.
This will be an unfair system of tax collection unless FBR produces a list of enhanced DC rates for each year for all localities staring from 2012. How can FBR decide on under developed and not possession plots of DHA & Bahria with the ones which are already developed if they decide one rate for these localities?
Moreover, no where in the world are taxes collected for past years when the rules are changed in the present year. Actually this new rule should apply to only those properties which are bought and sold from July 1, 2016.
i think no need to discuss this matter as this is another bluff. They dont Consider the ground realities while making any Law.
Thank you for clarification. As I understand, Overseas pakistanis pay taxes in the foreign country, send remittances to Pakistan but they will be treated as non filers and pay a higher rate of taxes.
Am I right?
Unfortunately, there is no firm system with FBR to distinguish the who is oversease Pakistani and who is not. Secondly, many many oversease Pakistanis are also investing in Pakistan in any business to earn profit, one of the most common and easy money business in Pakistan is property business for oversease Pakistanis. Any income earned in Pakistan is taxable and one should pay those taxes properly and file his/her income tax returns (easy process online) to become Filer. Even if you have nothing to earn or declare just fill the Incone tax Return with Nil values and you will become filer. Isn’t it easy 🙂
Good article, thanks for such info.
Regards:
Can somebody explain with numbers example; of how much we have to pay in taxes (both federal and provincial), if we r selling or buying a property.?
Its so confusing. CGT, WHT, 111, CVT, Stamps, money transaction tax…. Etc
what happens to withholding tax for non residents / dual citizens who are non filers. For people who have not been residents of Pakistan for long / decades they do not have NTN or file tax in Pakistan. Would FBR reimburse them withholding tax somehow?
Overseas Pakistanies send around 20 Billion $ each year and while the Government of Pakistan borrowed just 7.5 Billion for 3 years , see how they dance when ordered.
Just imagine for a while if this 20 $ is taken out of Pakistani economy; nothing but DISASTER
Calculating Taxes, this and that, is almost waste of time for everybody. If the Government has decided that taxes will be collected in billions then it will be done by hook or crook, no one can stop. By these new rules the general public will be suffered and crushed more, on the other hand, Politicians and Bureaucrats will find hundred ways to get rid of these when applied on them. I will be more than glad if the rules are implementing but it should be equally applied on each and everyone. Best Regards.
Samara ji . From where u get the info that overseas pakistanis will get 50% off from taxes.
It was shared widely in local press on last Sunday.
Real time case:
Last year in May 2015, I purchased 10 Marla in Bahria town overseas-B and it was transferred to my borther name as i was overseas. Now i want to transfer to my name. As per new law i am totally confuse and dont know what to do by paying this huge amount of tax… I understand as below,
Purchased actual valure= 6M PKR
If now i will transfer, my brother has to pay withholding tax 2% and CGT 7.5% as seller,
I have to pay withoulding tax 4% as purchase (as i am overseas and non filer).
Also i have to pay any other tax?
All this amount will be paid on actual value or new DC rate ? How much new DC rates for Bahria town?
Can some one clarify?
Good but there is nothing mentioned for overseas pakistanis- unlike the article heading.
Its 460,000/- rupees per Marla in Bahria Lahore.
is it mandatory for all purchase to pay below tax on each transfer,
CVT 2% @FBR Value
Stamp Duty 3% @/FBR Value
WHT 4% (Non filler)@FBR Value (Any relaxation for overseas pakistani?)
Mean total 9% on transfer to be paid by Purchaser other than society transfer fee?
Regards